Los Angeles
Ten years after two states legalized the recreational marijuana trade, the drug industry has grown exponentially. Today there are over 20 states that have legalized the drug and 18 that have cleared its medical use. In 2022, these states sold US$30 billion (R$150 billion) worth of cannabis, more than the Brazilian meat export market.
However, when compared to the illicit sales, which are still thriving in those same states, the numbers plummet by a multiple: $77 billion, or 72%, according to data from an industry analysis firm.
The difference throws the veil on the complexities of the marijuana business. According to experts, the fact that the drug remains illegal at the federal level poses challenges for states and localities that are struggling to regulate a market that has existed for decades without any regulation.
In California, the country’s largest market, unregulated sales were estimated at $8 billion, compared to $5.4 billion in legal trade in 2022. Among states without legalization, Texas tops the list for illegal sales , which is estimated at $6.4 billion, according to the New Frontier Data report.
“Legalization is still in its infancy. In reality, we’re still living under Prohibition,” says Dominic Corva, a professor at Cal Poly Humboldt University in the country’s historic marijuana production center. “There is no state with the best legalization of public order. Everyone has a story. But we’re making progress. For consumers, for those who could be arrested, these are important advances.”
In fact, in California, where all the evils of legalization seem to be found, marijuana is legal in less than half of the state. Only 39% of the 58 counties and 482 cities allow drug trafficking, leaving manufacturers without licensed shelves to distribute their wares. High state and county tax rates provide an additional incentive for illegal sales.
For Cat Packer, who spearheaded the creation of the Los Angeles Department’s cannabis ordinance, the federal ban encourages the existence of the illicit market. However, she claims to understand why certain communities don’t want legalization. Alongside the bureaucracy and lack of investment, knowledge and enthusiasm, there is fear of a repeat of what happened with the end of alcohol prohibition in lowincome Black and Hispanic communities.
“There is skepticism about this type of business. Certain communities don’t have a market or a hospital, but they have 10 liquor stores,” said Packer, who left Los Angeles City Hall in 2022 and is now a director of the Drug Policy Alliance, a pioneering organization defending drug policy reform in the Country. “It’s difficult in business to move from an unregulated market to a heavily regulated and taxed market,” he says, citing the lack of access to capital and banks due to the federal ban.
In Los Angeles, the world’s largest consumer market, it is estimated that there are between 700 and 1,000 illegal operators of shops and delivery services versus 354 operations that have the necessary licenses (and pay 34% taxes). In New York, where recreational sales began five months ago, there are approximately 1,400 illegal locations for five licensees (13% tax).
For Packer, New York won’t be the new California, although it has the potential to be the secondlargest market next to Florida. The New York background is more restricted in the previous legalization of medical use and requires less tax and bureaucracy in licensing.
California was the first state to allow medicinal use of the plant in 1996, but didn’t start regulating the market until 2015 recreational use hit the market in 2018. Even before legalization, there was oversupply and outofstate distribution illegal due to federal prohibition.
“Twenty years have passed without regulation. And it’s not just a hundred farmers in transition. It’s a thousand,” says Packer. “California wants to put toothpaste back in the tube, while New York is slowly narrowing the tube.”
Asked about the possibility of federal legalization, Packer says she doubts that will happen in the near future. “The federal government does not know what to do with cannabis. That’s very obvious.”
In addition to tax evasion and the distribution of untested drugs, the illicit market also poses other problems such as environmental problems and slavelike working conditions. In a series of reports, the Los Angeles Times reported the confiscation of wages from more than 200 farms, human trafficking and the deaths of 35 workers over a fiveyear period. Water diversion, pollution of streams with pesticides and deforestation of forest reserves are other aggravating factors of illegal production.
“We should be ashamed that we allowed this messy approach to legalization,” said Senator Dave Cortese, a Democrat from San Jose. “The cannabis industry is like the Wild West.”
Corva from Humboldt University describes that the illegal market consists of several levels. This includes organized crime and greedy corporations, but also “families just trying to survive”.
“The rural economy in California is in freefall,” he says. He says the state’s “green rush” is over after the last two years of low cannabis prices. Many people abandoned their farms in the area or moved to less saturated rangelands such as Oregon and Oklahoma. “Some of the greed is gone. Humboldt now needs a more sustainable path. A certain optimism is returning.”